JACO ELECTRONICS, INC.
145 Oser Avenue
Hauppauge, New York 11788
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
To be Held on December 8, 1999
--------------------------
To the Shareholders of JACO ELECTRONICS, INC.
Please be advised that the annual meeting of shareholders (the
"Annual Meeting") of Jaco Electronics, Inc. (the "Company") will be held on
December 8, 1999, at 1:00 p.m., at the Melville Marriot, 1350 Old Walt Whitman
Road, Melville, New York 11747.
The Annual Meeting will be held for the following purposes:
1. To elect five Directors of the Company to hold office until the next annual
meeting of shareholders or until their successors are duly elected and
qualified; and
2. To transact such other business as may properly come before the Annual
Meeting or any adjournments thereof.
The Board of Directors has fixed the close of business on October 26,
1999 as the record date for the determination of the shareholders entitled to
notice of and to vote at the Annual Meeting or any adjournment or adjournments
thereof. Only shareholders of record at the close of business on the record date
are entitled to notice of and to vote at the Annual Meeting.
YOUR VOTE IS IMPORTANT! PLEASE PROMPTLY MARK, DATE, SIGN, AND RETURN YOUR
PROXY IN THE ENCLOSED ENVELOPE. IF YOU ARE ABLE TO ATTEND THE MEETING AND WISH
TO VOTE YOUR SHARES PERSONALLY, YOU MAY DO SO AT ANY TIME BEFORE YOUR PROXY IS
VOTED.
By Order of the Board of Directors,
Joel H. Girsky,
Date: October 27, 1999 Chairman
<PAGE>
JACO ELECTRONICS, INC.
145 Oser Avenue
Hauppauge, New York 11788
---------------
PROXY STATEMENT
---------------
This Proxy Statement is furnished in connection with the
solicitation by the Board of Directors of Jaco Electronics, Inc. (the "Company")
of proxies to be voted at the annual meeting of shareholders (the "Annual
Meeting") to be held on December 8, 1999, at 1:00 p.m., at the Melville Marriot,
1350 Old Walt Whitman Road, Melville, New York, 11747, and any and all
adjournments thereof.
The solicitation will be by mail, and the cost of such
solicitation, including the reimbursement of brokerage firms and others for
their expenses in forwarding proxies and proxy statements to the beneficial
owners of the Company's common stock, will be borne by the Company.
The shares of common stock represented by each duly executed
proxy received by the Board of Directors before the Annual Meeting will be voted
at the Annual Meeting as specified in the proxy. A shareholder may withhold
authority to vote for all of the nominees by marking the appropriate box on the
accompanying proxy card or may withhold authority to vote for an individual
nominee by striking a line through such nominee's name in the appropriate space
on the accompanying proxy card. UNLESS INSTRUCTIONS TO THE CONTRARY ARE GIVEN,
EACH PROPERLY EXECUTED PROXY WILL BE VOTED FOR THE ELECTION OF DIRECTORS NAMED
IN THIS PROXY. Shareholders who execute proxies nevertheless retain the right to
revoke them at any time before they are voted by submitting new proxies bearing
a later date, by submitting written revocations to the named proxies, or by
attending the Annual Meeting and voting thereat.
This Proxy Statement, the accompanying form of proxy, and the
1999 Annual Report to Shareholders, are first being sent to shareholders on or
about November 4, 1999 (the "Mailing Date").
VOTING SECURITIES AND RECORD DATE
The Board of Directors has designated October 26, 1999, as the
record date (the "Record Date") for determining the shareholders entitled to
notice of the Annual Meeting and to vote thereat. On the Record Date, the total
number of shares of common stock of the Company, $0.10 par value per share (the
"Common Stock"), outstanding and entitled to vote was 3,653,521 (excluding
412,200 shares of treasury stock). The holders of all outstanding shares of
Common Stock are entitled to one vote for each share of Common Stock registered
in their names on the books of the Company at the close of business on the
Record Date. The presence in person or by proxy of a majority of the outstanding
shares of the Common Stock entitled to vote at the Annual Meeting will be
necessary to constitute a quorum. Abstentions and broker non-votes on any item
will not be counted as voting in respect of such item; they will be counted only
for purposes of determining whether a quorum is present at the Annual Meeting.
PRINCIPAL SHAREHOLDERS; SHARES HELD BY MANAGEMENT
The following table sets forth the number and percentage of
shares of Common Stock owned as of October 22, 1999 by (i) each director of the
Company and each nominee for director, (ii) all persons who, to the knowledge of
the Company, are the beneficial owners of more than 5% of the outstanding shares
of Common Stock, (iii) each of the executive officers, and (iv) all of the
Company's Directors and executive officers, as a group. Each person named in the
table has sole investment power and sole voting power with respect to the shares
of Common Stock set forth opposite such person's name, except as otherwise
indicated.
1
<PAGE>
<TABLE>
<CAPTION>
Percentage of
Number of Shares Common Stock
Name of Beneficial Owner Beneficially Owned(1) Outstanding(2)
- ------------------------ ------------------------ -----------------
* Joel H. Girsky
President, Treasurer
<S> <C> <C>
and Director 582,739(3) 15.5%
* Charles B. Girsky
Executive Vice President and
Director 304,774(4) 8.3%
* Stephen A. Cohen
Director 24,021(5) **
- --------------------------
</TABLE>
* Nominee for election to the Board of Directors.
** Less than 1%.
1 Includes shares of Common Stock issuable pursuant to options exercisable
within sixty (60) days from the date hereof. Also includes shares of Common
Stock awarded under the Restricted Stock Plan.
2 Based upon (i) 3,653,521 shares of Common Stock issued and outstanding
(excluding 412,200 shares of treasury stock), plus, if appropriate, (ii)
the number of shares of Common Stock which may be acquired by the named
person or by all persons included in the group pursuant to the exercise of
options exercisable within sixty (60) days from the date hereof.
3 Includes 115,399 shares of Common Stock acquirable pursuant to the
exercise of options granted under the Company's 1993 Non-Qualified Plan
and 25,000 shares of Common Stock awarded under the Restricted Stock Plan.
Does not include 100,000 shares of Common Stock acquirable pursuant to the
exercise of options granted under the Company's 1993 Non-Qualified Plan
which are not exercisable within sixty (60) days from the date hereof.
4 Includes 236,077 shares of Common Stock owned by the Girsky Family Trust,
40,000 shares of Common Stock acquirable pursuant to the exercise of
options granted under the Company's 1993 Non-Qualified Plan and 25,000
shares of Common Stock awarded under the Restricted Stock Plan. Does not
include 35,000 shares of Common Stock acquirable pursuant to the exercise
of options granted under the Company's 1993 Non-Qualified Plan which are
not exercisable within sixty (60) days from the date hereof.
5 Includes 11,732 shares of Common Stock acquirable pursuant to the exercise
of options granted under the Company's 1993 Stock Option Plan for Outside
Directors and 7,500 shares of Common Stock acquirable pursuant to the
exercise of non-qualified stock options granted to Mr. Cohen by the
Company. Does not include 7,500 shares of Common Stock acquirable pursuant
to the exercise of options granted under the Company's 1993 Non-Qualified
Plan which are not exercisable within sixty (60) days from the date
hereof.
2
<PAGE>
<TABLE>
<CAPTION>
Percentage of
Number of Shares Common Stock
Name of Beneficial Owner Beneficially Owned(1) Outstanding (2)
- ------------------------ ------------------ -----------
*Edward M. Frankel
<S> <C>
Director 19,232(6) **
*Joseph F. Hickey, Jr. 13,933(7) **
Director
Jeffrey D. Gash
Vice President, Finance and
Secretary 25,532(8) **
Herbert Entenberg
Former Vice President of Management
and Information Systems,
and Secretary 12,500(9) **
Heartland Advisors, Inc.
790 North Milwaukee Street
Milwaukee, WI 53202 821,900(10) 22.5%
</TABLE>
- ------------------------------
6 Includes 11,732 shares of Common Stock acquirable pursuant to the exercise
of options granted under the Company's 1993 Stock Option Plan for Outside
Directors and 7,500 shares of Common Stock acquirable pursuant to the
exercise of non-qualified stock options granted to Mr. Frankel by the
Company. Does not include 7,500 shares of Common Stock acquirable pursuant
to the exercise of options granted under the Company's 1993 Non-Qualified
Plan which are not exercisable within sixty (60) days from the date
hereof.
7 Includes 2,933 shares of Common Stock acquirable pursuant to the exercise
of options granted under the Company's 1993 Stock Option Plan for Outside
Directors and 10,000 shares of Common Stock acquirable pursuant to the
exercise of non-qualified stock options granted to Mr. Hickey by the
Company. Does not include 7,500 shares of Common Stock acquirable pursuant
to the exercise of options granted under the Company's 1993 Non-Qualified
Plan which are not exercisable within sixty (60) days from the date
hereof.
8 Includes 15,000 shares of Common Stock acquirable pursuant to the exercise
of options granted under the Company's 1993 Non-Qualified Plan and 10,000
shares of Common Stock awarded under the Restricted Stock Plan. Does not
include 20,000 shares of Common Stock acquirable pursuant to the exercise
of options granted under the Company's 1993 Non-Qualified Plan which are
not exercisable within sixty (60) days from the date hereof.
9 Consists of 7,500 shares of Common Stock acquirable pursuant to the
exercise of options granted under the Company's 1993 Non-Qualified Plan and
5,000 shares of Common Stock awarded under the Restricted Stock Plan.
10 These securities are held in investment advisory accounts of Heartland
Advisors, Inc. Based upon Amendment No. 5 to Schedule 13G dated January
21, 1999, and information made available to the Company.
3
<PAGE>
<TABLE>
Percentage of
Number of Shares Common Stock
Name of Beneficial Owner Beneficially Owned(1) Outstanding(2)
- ------------------------ ------------------ -----------
<S> <C> <C>
Dimensional Fund Advisors 257,550(11) 7.0%
1229 Ocean Avenue
Santa Monica, CA 90401
Broadstreet Asset Management 190,000(11) 5.2%
1900 E. 9th Street
Cleveland, OH 44114
All Directors and executive officers 957,199(12) 24.7%
as a group (7 persons)
</TABLE>
PROPOSAL 1
ELECTION OF DIRECTORS
Five directors are to be elected to serve until the next annual meeting of
shareholders or until their successors are elected and qualified. Directors
shall be elected by shareholders holding a plurality of the shares of Common
Stock present at the Annual Meeting. It is the intention of the persons named in
the form of proxy, unless authority is withheld, to vote the proxies given them
for the election of all nominees hereinafter named, all of whom are presently
directors of the Company. In the event, however, that any one of them is unable
or declines to serve as a director, the appointees named in the form of proxy
reserve the right to substitute another person of their choice as nominee, in
his place and stead, or to vote for such lesser number of directors as may be
presented by the Board of Directors in accordance with the Company's By-Laws.
- ------------------------------
11 Based on information made available to the Company.
12 Includes 219,296 shares of Common Stock acquirable pursuant to the
exercise of options and 65,000 shares of Common Stock awarded under the
Restricted Stock Plan.
4
<PAGE>
The nominees for the Board of Directors of the Company are as
follows:
Stephen A. Cohen
Edward M. Frankel
Charles B. Girsky
Joel H. Girsky
Joseph F. Hickey, Jr.
Information about the foregoing nominees is set forth under
"Management" below.
Unless marked to the contrary, the shares of Common Stock
represented by the enclosed Proxy will be voted FOR the election of the nominees
named above as directors.
THE BOARD OF DIRECTORS RECOMMENDS THAT THE SHAREHOLDERS VOTE
FOR THE ELECTION OF ALL NOMINEES NAMED ABOVE TO THE BOARD OF DIRECTORS.
The Board of Directors held four meetings during the year
ended June 30, 1999 ("Fiscal 1999") and actions by unanimous consent. Each
director (during the period in which each such director served) attended at
least seventy-five (75%) percent of the aggregate of (i) the total number of
meetings of the Board of Directors, plus (ii) the total number of meetings held
by all committees of the Board of Directors on which the director served.
The Board of Directors has a standing Audit Committee and a
standing Compensation Committee. The Board of Directors had an Option Committee
in place until December 9, 1997. The Option Committee was not reappointed during
the fiscal year ended June 30, 1998 ("Fiscal 1998"). The entire Board of
Directors administered the Company's 1993 Non-Qualified Plan and Restricted
Stock Plan during Fiscal 1999. The Audit Committee reviews the work and reports
of the Company's independent accountants. During Fiscal 1999, the Audit
Committee was comprised of Stephen A. Cohen and Edward M. Frankel. The Audit
Committee met once during Fiscal 1999. The Compensation Committee makes
recommendations to the Board of Directors concerning compensation arrangements
for directors, executive officers, and senior management of the Company. The
Compensation Committee did not meet during Fiscal 1999. Until December 9, 1997,
the Compensation Committee consisted of Messrs. Cohen and Frankel. Since
December 9, 1997, the Compensation Committee has been comprised of Mr. Frankel
and Joseph F. Hickey, Jr.
MANAGEMENT
Executive Officers and Directors
- ---------------------------------
The current directors and executive officers of the Company,
their ages, their positions and terms of office with the Company are set forth
below.
5
<PAGE>
<TABLE>
<CAPTION>
Name Age Title
- -------------- ----------- ----------
<S> <C>
* Joel H. Girsky 60 Chairman of the Board, President, Treasurer, and
Director
* Charles B. Girsky 65 Executive Vice President and Director
* Stephen A. Cohen 62 Director
* Edward M. Frankel 61 Director
* Joseph F. Hickey, Jr. 41 Director
Jeffrey D. Gash 46 Vice President, Finance and Secretary
- -------------------------
* Nominee for election to the Board of Directors.
</TABLE>
Joel H. Girsky has been a Director and executive officer of the Company
since it was founded in 1961. He also is a director of Nastech Pharmaceutical
Company, Inc. of Hauppauge, New York, and Frequency Electronics, Inc. of
Uniondale, New York. Messrs. Joel H. Girsky and Charles B. Girsky are brothers.
Charles B. Girsky became an executive officer of the Company
on August 2, 1985 and has been its Executive Vice President since January 1988.
Since April, 1984, he has been President of Distel, Inc., a wholly-owned
subsidiary of the Company since August, 1985. He was a founder, Director, and
the President of the Company from 1961 through January, 1983, and was elected a
Director of the Company again in 1986. Messrs. Charles B. Girsky and Joel H.
Girsky are brothers.
Stephen A. Cohen has been a Director of the Company since
1970. Since August, 1989, he has practiced law as a member of Morrison Cohen
Singer & Weinstein, LLP, general counsel to the Company.
Edward M. Frankel became a Director of the Company in May,
1984. For more than five years, he has been President of Vitaquest
International, Inc., a distributor of vitamins and health and beauty products,
and its predecessor entities.
Joseph F. Hickey, Jr. became a Director of the Company on May
28, 1997. Since February 1, 1991, he has been employed by Tucker Cleary
(formerly, Cleary Gull Reiland and McDevitt Inc.), an investment banking firm
located in Milwaukee, Wisconsin. Since 1997, he has been the managing director
at Tucker Cleary's syndication department.
Jeffrey D. Gash became Vice President of Finance of the
Company in January, 1989, and was Controller of the Company for more than five
years prior thereto. Effective September 15, 1999, he became Secretary of the
Company. He has also served in similar capacities with the Company's
subsidiaries.
6
<PAGE>
EXECUTIVE COMPENSATION AND OTHER INFORMATION
Summary of Cash and Certain Other Compensation
The following table sets forth, for the Company's three most
recently ended fiscal years, the compensation paid or accrued to the President
of the Company and to the executive officers of the Company, other than the
President, whose aggregate annual salary and bonus for the Company's last fiscal
year exceeded $100,000:
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Annual Compensation
Name and ----------------------- Other
Principal Annual
Position Year Salary($) Bonus($) Compensation($)
- -------- ---- --------- -------- ---------------
<S> <C> <C> <C> <C>
Joel H. Girsky, 1997 325,000 210,000 -
Chairman of the Board, 1998 325,000 81,000 -
President, and Treasurer(1) 1999 325,000 -
Charles B. Girsky, 1997 225,000 73,475 -
Executive Vice President(3) 1998 225,000 41,000 -
1999 225,000
Jeffrey D. Gash 1997 104,808 25,000 -
Vice President, Finance 1998 125,000 28,100 -
and Secretary(4) 1999 125,000 25,800
Herbert Entenberg 1997 102,560 10,481 -
Former Vice President of 1998 109,920 30,694 -
Management and 1999 114,520 32,800
Information Systems,
and Secretary
</TABLE>
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
Long-Term Compensation
--------------------------
Awards Payouts
-------- ---------
Name and Restricted All Other
Principal Stock Options/ LTIP Compensation
Position Awards($) SARs (#) Payouts ($)(2)
- -------- --------- --------- -------- ---------------
<S> <C> <C> <C> <C>
Joel H. Girsky, 150,000** 15,399 - 73,924
Chairman of the Board, - - 77,196
President, and Treasurer(1) 200,000 77,903
Charles B. Girsky, 150,000** 25,000 - 4,976
Executive Vice President(3) - - 6,719
35,000 6,718
Jeffrey D. Gash 60,000** 10,000 - 2,004
Vice President, Finance - - - 3,920
and Secretary(4) _ 20,000 4,771
Herbert Entenberg 30,000** 5,000 - 3,343
Former Vice President of - - - 4,926
Management and _ _ 7,069
Information Systems,
and Secretary
</TABLE>
- -----------------------
7
<PAGE>
(1) Mr. Joel Girsky entered into a four-year employment agreement with the
Company, effective as of July 1, 1997, to serve as the Company's Chairman
and President. The employment agreement will automatically renew for
additional one year periods on each anniversary date, until such time that
the Company or Mr. Joel Girsky delivers written notice to the other party
not less than 90 days prior to an anniversary date, declining such renewal.
In the event that a notice of non-renewal is delivered by either party, Mr.
Girsky's employment agreement shall continue for a period of three years
following the anniversary date which follows immediately after the date
that such notice is delivered. Pursuant to the agreement, Mr. Joel Girsky
received a base salary of $325,000 for the fiscal year ended June 30, 1998
and shall receive a base salary of $325,000 for each fiscal year ending
June 30, thereafter. In addition, he is entitled to receive a cash bonus
equal to four percent (4%) of the Company's earnings before income taxes
for each fiscal year in which such earnings are in excess of $1,000,000, or
six percent (6%) of the Company's earnings before income taxes for such
fiscal year if such earnings are in excess of $2,500,000 up to a maximum
annual cash bonus of $720,000. If the Company's earnings before income
taxes are in excess of $12,000,000 for any such fiscal year, Mr. Girsky may
also receive common stock options of the Company as negotiated by Mr.
Girsky and the Company at such time. Mr. Girsky or his estate, as the case
may be, is entitled to receive a payment of $1,500,000 if he dies or
becomes permanently disabled during the term of the employment agreement.
The death and disability benefit may be funded by insurance policies
maintained by the Company. In the event of Mr. Girsky's cessation of
employment with the Company, upon his request, the Company is obligated to
transfer such policies to Mr. Girsky. Thereafter, the Company would have no
further liability for the payment of such benefit or the premiums on such
policy. In addition, pursuant to the terms of the employment agreement, Mr.
Girsky shall receive deferred compensation which accrues at the rate of
$50,000 per year, and becomes payable in a lump sum at the later of (i) Mr.
Girsky's attainment of age 60 (which event occurred in Fiscal 1999), or
(ii) his cessation of employment, with or without cause, at any time. In
the event of a change in control, Mr. Girsky will receive two hundred and
ninety-nine percent of the average of his base salary plus cash bonus for
the previous five years, to the extent that such payment does not equal or
exceed three times Mr. Girsky's base amount, as computed in accordance with
Section 280G(d)(4) of the Internal Revenue Code of 1986. Additionally, upon
a change of control, Mr. Girsky's employment agreement may be assigned by
the Company or any such successor or surviving corporation upon sixty days
prior written notice to Mr. Girsky.
(2) Includes auto expenses, 401(k) matching contributions by the Company,
premiums paid on group term life insurance, taxable portion of split dollar
life insurance policies and deferred compensation accrued in connection
with Mr. Joel Girsky's employment agreement with the Company, as described
in footnote (1) above. Auto expenses for Fiscal 1999 for the Named
Executives were as follows: Mr. Joel Girsky - $19,347, Mr. Charles Girsky
-- $3,574, Mr. Gash -- $2,554 and Mr. Entenberg -- $4,554. 401(k) matching
contributions for Fiscal 1999 for the Named Executives were as follows: Mr.
Joel Girsky -- $1,000, Mr. Charles Girsky -- $1,038, Mr. Gash -- $1,695 and
Mr. Entenberg -- $999. Premiums paid on group term life insurance for
Fiscal 1999 for the Named Executives were as follows: Mr. Joel Girsky --
$1,350, Mr. Charles Girsky -- $2,106, Mr. Gash --$522 and Mr. Entenberg -
$1,516. The taxable portion of split dollar life insurance policies for Mr.
Joel Girsky was $6,206 for Fiscal 1999. $50,000 deferred compensation was
accrued in Fiscal 1999 in connection with Mr. Joel Girsky's employment
agreement with the Company.
8
<PAGE>
(3) Mr. Charles Girsky entered into a four-year employment agreement with the
Company, effective as of July 1, 1998, to serve as the Company's Executive
Vice President. The employment agreement will automatically renew for
additional one year periods on each anniversary date, until such time that
the Company or Mr. Charles Girsky delivers written notice to the other
party not less than 90 days prior to an anniversary date, declining such
renewal. In the event that a notice of non-renewal is delivered by either
party, Mr. Girsky's employment agreement shall continue for a period of
three years following the anniversary date which follows immediately after
the date that such notice is delivered. Pursuant to the agreement, Mr.
Girsky received a base salary of $225,000 for the fiscal year ended June
30, 1999, and shall receive a base salary of $225,000 for each fiscal year
ending June 30, thereafter. In addition, he is entitled to receive a cash
bonus equal to two percent (2%) of the Company's earnings before income
taxes for each fiscal year in which such earnings are in excess of
$1,000,000, or three percent (3%) of the Company's earnings before income
taxes for such fiscal year if such earnings exceed $2,500,000 up to a
maximum annual cash bonus of $360,000. If the Company's earnings before
income taxes are in excess of $12,000,000 for any such fiscal year, Mr.
Girsky may receive the number of common stock options of the Company as
shall be negotiated by Mr. Girsky and the Company at that time. Mr. Girsky
or his estate, as the case may be, is entitled to receive a payment of
$1,000,000 if he dies during the term of the employment agreement. The
death benefit may be funded by a life insurance policy maintained by the
Company. In the event of Mr. Girsky's cessation of employment with the
Company, upon his request, the Company is obligated to transfer such policy
to Mr. Girsky. Thereafter, the Company would have no further liability for
the payment of such benefit or the premiums on such policy. In the event of
a change in control, Mr. Girsky will receive two hundred and fifty percent
of the average of his base salary plus cash bonus for the previous five
years, to the extent that such payment does not equal or exceed three times
Mr. Girsky's base amount, as computed in accordance with Section 280G(d)(4)
of the Internal Revenue Code of 1986. Additionally, upon a change of
control, Mr. Girsky's employment agreement may be assigned by the Company
or any such successor or surviving corporation upon sixty days prior
written notice to Mr. Girsky.
(4) Mr. Jeffrey D. Gash entered into a four-year employment agreement with the
Company, effective as of July 1, 1998, to serve as the Company's Vice
President of Finance. The employment agreement will automatically renew for
additional one year periods on each anniversary date, until such time that
the Company or Mr. Gash delivers written notice to the other party not less
than 90 days prior to an anniversary date, declining such renewal. In the
event that a notice of non-renewal is delivered by either party, Mr. Gash's
employment agreement shall continue for a period of three years following
the anniversary date which follows immediately after the date that such
notice is delivered. Pursuant to the agreement, Mr. Gash received a base
salary of $125,000 for the fiscal year ended June 30, 1999, and shall
receive a base salary of $125,000 for each fiscal year ending June 30,
thereafter. In addition, he is entitled to receive a cash bonus as
determined by the Board of Directors and the President of the Company. Mr.
Gash or his estate, as the case may be, is entitled to receive a payment of
$750,000 if he dies during the term of the employment agreement. The death
benefit may be funded by a life insurance policy maintained by the Company.
In the event of Mr. Gash's cessation of employment with the Company, upon
his request, the Company is obligated to transfer such policy to Mr. Gash.
Thereafter, the Company would have no further liability for the payment of
such benefit or the premiums on such policy. In the event of a change in
control, Mr. Gash will receive two hundred percent of the average of his
base salary plus cash bonus for the previous five years, to the extent that
such payment does not equal or exceed three times Mr Gash's base amount, as
computed in accordance with Section 280G(d)(4) of the Internal Revenue Code
of 1986. Additionally, upon a change of control, Mr. Gash's employment
agreement may be assigned by the Company or any such successor or surviving
corporation upon sixty days prior written notice to Mr. Gash.
** On June 9, 1997, the Board of Directors awarded an aggregate of 65,000
shares of Common Stock of the Company under the Restricted Stock Plan to
executive officers of the Company as follows: 25,000 shares of Common Stock
to Joel Girsky, 25,000 shares of Common Stock to Charles Girsky, 10,000
shares of Common Stock to Jeffrey Gash and 5,000 shares of Common Stock to
Herbert Entenberg. These grants were subject to the approval of the
Restricted Stock Plan by the Company's shareholders, which approval was
received on December 9, 1997. The awards vest in one-quarter increments
annually. Accordingly, as of June 30, 1999, the following portions of the
aforementioned awards were vested: 12,500 shares of Common Stock awarded to
each of Joel Girsky and Charles Girsky, 5,000 shares of Common Stock
awarded to Jeffrey Gash and 2,500 shares of Common Stock awarded to Herbert
Entenberg. The value of the aggregate restricted stock holdings of these
individuals at June 30, 1999 was as follows: $78,125 for Joel H. Girsky,
$78,125 for Charles B. Girsky, $31,250 for Jeffrey D. Gash and $15,625 for
Herbert Entenberg. These figures are based upon the fair market value per
share of the Common Stock at year end, minus the exercise or base price of
such awards. The closing sale price for the Company's Common Stock as of
June 30, 1999 on the NASDAQ National Market System was $4.125.
9
<PAGE>
Stock Options
The following tables set forth information concerning the
grant of stock options made during Fiscal 1999 to each of the persons described
in the Summary Compensation Table on pages 7, 8 and 9 and the number and value
of unexercised options held by them at the fiscal year-end.
<TABLE>
<CAPTION>
OPTION/SAR GRANTS IN LAST FISCAL YEAR
Individual Grants
Potential Realizable Value
At Assumed Annual Rates
of Stock Price Appreciation
For Option Term (3)
Percent of
Total
Number of Options/
Securities SARs
Underlying Granted to
Options/SARs Employees Exercise or Expiration
Granted in Fiscal Base Price Date
Name (#) Year ($/Sh) 5%($) 10%($)
- ------- --------------- ------------- ----------- ---------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Joel H. Girsky 100,000 (1) 40% $ 4.125 September 15, 2003 $113,966 $ 251,835
100,000 (2) 40% $ 2.6875 March 21, 2004 $74,251 $ 164,075
Charles B. Girsky 25,000 (2) 10% $ 2.6875 March 21, 2004 $18,563 $41,019
Jeffrey D. Gash 10,000 (2) 4% $ 2.6875 March 21, 2004 $7,425 $16,407
Herbert Entenberg - - - - - - - -
</TABLE>
(1) The options in the table were granted on September 16, 1998 under the
Company's 1993 Non-Qualified Plan and have exercise prices equal to the
fair market value of the Common Stock on the date of grant. The options
become exercisable one year from the date of grant.
(2) The options in the table were granted on March 22, 1999 under the
Company's 1993 Non-Qualified Plan and have exercise prices equal to the
fair market value of the Common Stock on the date of grant. The options
become exercisable one year from the date of grant.
(3) The potential realizable value assumes that the stock price increases
from the date of grant until the end of the option term (5 years) at
the annual rate of 5% and 10%. The assumed annual rates of appreciation
are computed in accordance with the rules and regulations of the
Securities and Exchange Commission. No assurance can be given that the
annual rates of appreciation assumed for the purposes of the table will
be achieved, and actual results may be lower or higher.
10
<PAGE>
<TABLE>
<CAPTION>
AGGREGATE OPTIONS/SAR EXERCISES IN LAST FISCAL YEAR
AND FY-END OPTION/SAR VALUES
Value of Unexercised
Shares Number of Unexercised In-the-Money
Acquired Option/SARs at Option/SARs at
on Value FY-End (#) FY-End ($)(1)
Exercise(#) Realized($) Exercisable Unexercisable Exercisable Unexercisable
------------ ------------ ------------- --------------- ------------- --------------
<S> <C> <C> <C> <C> <C> <C>
Joel H. Girsky -- -- 115,399 100,000 0 $143,750
Charles B. Girsky - -- 40,000 25,000 0 $ 35,938
Jeffrey D. Gash - -- 15,000 10,000 0 $ 14,375
Herbert Entenberg -- -- 7,500 0 0 $ 0
</TABLE>
- -------------------------
(1) Based on the fair market value per share of the Common Stock at
year end, minus the exercise or base price on "in-the-money"
options. The closing sale price for the Company's Common Stock
as of June 30, 1999 on the NASDAQ National Market System was
$4.125.
Compensation of Directors
Pursuant to the Company's 1993 Stock Option Plan for Outside
Directors (the "Outside Directors Plan"), the Company's outside
directors (directors who are not employees of the Company) were each
granted options on December 31, 1993 to purchase 14,667 shares of
Common Stock. In addition, the Outside Directors' Plan provided that
each outside director shall also be granted on each December 31
subsequent to December 31, 1993 stock options to purchase 2,933 shares
of Common Stock. All options granted under the Outside Directors' Plan
are immediately exercisable, and the exercise price per share of each
option is equal to the fair market value of the shares of Common Stock
on the date of grant. No option may be granted after January 1, 1998
under the Outside Directors' Plan.
On September 16, 1998, each of Messrs. Cohen and Frankel were
granted options to purchase 7,500 shares of Common Stock. The options
became exercisable one year from the date of grant and expire on
September 15, 2003. The exercise price per share of each option is
equal to the closing price of the Common Stock on the date of grant, or
$4.125 per share.
On September 15, 1999, the Company granted each of Mr. Stephen
A. Cohen, Mr. Edward M. Frankel and Mr. Joseph F. Hickey, Jr., five
year options to purchase 7,500 shares of Common Stock at an exercise
price of $3.75 per share. The exercise price of each share underlying
such options is equal to the fair market value of the Common Stock on
such date. The options vest on the one year anniversary date of the
date of grant and were issued pursuant to the Company's 1993
Non-Qualified Plan.
11
<PAGE>
Employment Contracts and Termination of Employment
and Change-In-Control Arrangements
The Company's employment agreements with Messrs. Joel Girsky, Charles
Girsky and Jeffrey Gash are described in the footnotes to the Summary
Compensation Table on pages 8 and 9 of this Proxy Statement.
Compensation Committee Interlocks and Insider Participation
Stephen A. Cohen, a Director of the Company, is a member of Morrison
Cohen Singer & Weinstein, LLP, general counsel to the Company. Mr. Cohen
currently owns 4,789 shares of Common Stock, currently exercisable options to
purchase an additional 19,232 shares of Common Stock and options to purchase an
additional 7,500 shares of Common Stock which become exercisable on September
15, 2000. As of December 9, 1997, Mr. Cohen ceased serving as a member of the
Company's Compensation Committee.
Joseph F. Hickey, Jr., a Director of the Company is a managing director
at Tucker Cleary (formerly, Cleary Gull Reiland and McDevitt Inc.) ("Cleary").
Cleary co-managed the Company's offering of Common Stock in 1995, and is a
market maker of the Company's Common Stock. Mr. Hickey currently owns 1,000
shares of Common Stock, currently exercisable options to purchase an additional
12,933 shares of Common Stock, and options to purchase an additional 7,500
shares of Common Stock which become exercisable on September 15, 2000. As of
December 9, 1997, Mr. Hickey became a member of the Company's Compensation
Committee.
Board Compensation Committee Report on Executive Compensation
Introduction
The Compensation Committee of the Board of Directors of the Company (the
"Committee") is composed of non-employee Directors. The Committee is responsible
for determining and administering the Company's compensation policies for the
remuneration of the Company's senior executive officers (collectively,
"Executives"). In determining the cash and non-cash compensation of Executives,
the Committee annually evaluates both individual and corporate performance from
both a short-term and long-term perspective.
12
<PAGE>
Philosophy
The Company's compensation program for Executives ("Program") seeks to
encourage the achievement of business objectives of the Company and superior
corporate performance by the Company's Executives. The Program enables the
Company to reward and retain highly qualified executives and to foster a
performance-oriented environment wherein management's long-term focus is on
maximizing stockholder value through the use of equity-based incentives. The
Program calls for consideration of the nature of each Executive's work and
responsibilities, his or her leadership and technical skills, unusual
accomplishments or achievements on the Company's behalf, years of service, the
Executive's total compensation package (cash and non-cash compensation) and the
Company's financial condition generally.
Components of Executive Compensation
Historically, the Company's executive employees have received cash-based
and equity-based compensation. The Company attempts to pay its executive
officers competitively in order that it may retain the most capable people in
the industry.
Cash-Based Compensation: Base salary represents the primary cash
component of an Executive's compensation, and is determined by evaluating the
responsibilities associated with an Executive's position at the Company and his
or her overall level of experience. In addition, the Committee, in its
discretion, may award bonuses. The Committee believes that the Executives are
best motivated through a combination of stock option awards and cash incentives.
Equity-Based Compensation: Equity-based compensation principally has
been in the form of stock options, granted pursuant to the Company's 1993
Non-Qualified Plan and awards of shares of Common Stock under the Company's
Restricted Stock Plan. The Committee believes that stock options represent an
important component of a well-balanced compensation program. Because stock
option awards provide value only in the event of share price appreciation, stock
options enhance management's focus on maximizing long term shareholder value,
and thus provide a direct relationship between an executive's compensation and
the shareholders' interests. No specific formula is used to determine option
awards for an Executive. Rather, individual award levels are based upon the
subjective evaluation of each Executive's overall past and expected future
contributions to the success of the Company. Additionally, the Committee
believes that awards under the Restricted Stock Plan will enhance the alignment
of an Executive's interest with that of the shareholders, because the Executive
may be able to realize greater value with increased stock performance.
Compensation of the Chief Executive Officer
The philosophy, factors, and criteria of the Committee generally
applicable to the Company's senior management is applicable to the Chief
Executive Officer.
Joseph F. Hickey, Jr.
Edward M. Frankel
13
<PAGE>
Directors' and Officers' Liability Insurance
The Company has purchased a directors' and officers' liability
insurance policy, as permitted by Article 7 of the New York Business Corporation
Law. National Union Insurance Company issued the policy, which provides coverage
of $5,000,000 for an annual premium of $55,000. The policy has an expiration
date of February 5, 2000 and is expected to be renewed on that date.
Comparative Stock Performance Graph
The following is a graph comparing the annual percentage change in the
cumulative total shareholder return of the Company's Common Stock with the
cumulative total returns of the published Dow Jones Equity Market Index and Dow
Jones Industrial & Commercial Services -- General Services Index, for the
Company's last five (5) fiscal years:
<TABLE>
<CAPTION>
{Chart and Graph}
1994 1995 1996 1997 1998 1999
<S> <C> <C> <C> <C> <C> <C>
Jaco Electronics, Inc. 100 134 212 151 126 86
Dow Jones Equity Market Index 100 126 159 212 178 341
Dow Jones Industrial @ Commercial Services - General Services 100 116 133 151 179 188
</TABLE>
INDEPENDENT AUDITORS
The Board of Directors selected Grant Thornton LLP as independent
auditors for its fiscal year ended June 30, 1999. Grant Thornton LLP were also
auditors for the fiscal year ended June 30, 1998. The Board of Directors expects
that representatives of Grant Thornton LLP will be present at the Annual
Meeting, will be afforded an opportunity to make a statement, and will be
available to respond to appropriate inquiries from shareholders.
14
<PAGE>
CERTAIN TRANSACTIONS
During the fiscal year ended June 30, 1999, the Company incurred
approximately $602,000 of rental expenses in connection with its main
headquarters and centralized inventory distribution facility, located in
Hauppauge, New York, which was paid to Bemar Realty Company ("Bemar"), the owner
of such premises. Bemar is a partnership consisting of Messrs. Joel Girsky and
Charles Girsky, both of whom are officers, directors and principal shareholders
of the Company. The lease on the property, which is net of all expenses,
including taxes, utilities, insurance, maintenance and repairs was renewed on
January 1, 1996 and expires on December 31, 2003. The Company believes the
current rental rate is at its fair market value.
COMPLIANCE WITH SECTION 16(a) OF SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Exchange Act requires the Company's directors and
executive officers, and persons who beneficially own more than ten percent of
the Common Stock (the "Ten Percent Shareholders") to file with the Securities
and Exchange Commission initial reports of beneficial ownership on Form 3 and
reports of changes in beneficial ownership on Form 4 or Form 5. Executive
officers, directors, and Ten Percent Shareholders are required to furnish the
Company with copies of such Forms. Based solely on a review of such Forms
furnished to the Company and written representations from certain reporting
persons, the Company believes that during Fiscal 1999, the Company's executive
officers, directors, and Ten Percent Shareholders complied with all applicable
Section 16(a) filing requirements.
SHAREHOLDER PROPOSALS TO BE PRESENTED AT THE NEXT ANNUAL MEETING
Shareholder Proposals. Proposals of shareholders intended to be
presented at the Company's 2000 Annual Shareholder Meeting (i) must be received
by the Company at its offices no later than August 4, 2000, 92 days preceding
the one year anniversary of the Mailing Date, (ii) may not exceed 500 words and
(iii) must otherwise satisfy the conditions established by the Commission for
stockholder proposals to be included in the Company's Proxy Statement for that
meeting.
Discretionary Proposals. Shareholders intending to commence their own
proxy solicitations and present proposals from the floor of the 2000 Annual
Shareholder Meeting in compliance with Rule 14a-4 promulgated under the Exchange
Act of 1934, as amended, must notify the Company before September 20, 2000, 45
days preceding the one year anniversary of the Mailing Date, of such intentions.
After such date, the Company's proxy in connection with the 2000 Annual
Shareholder's Meeting may confer discretionary authority on the Board to vote.
15
<PAGE>
GENERAL
The Board of Directors knows of no other matters which are likely to be
brought before the Annual Meeting. If, however, any other matters are properly
brought before the Annual Meeting, the persons named in the enclosed proxy or
their substitutes shall vote thereon in accordance with their judgment pursuant
to the discretionary authority conferred by the form of proxy.
By Order of the Board of Directors,
Joel H. Girsky,
Chairman
Hauppauge, New York
October 27, 1999
16
<PAGE>
JACO ELECTRONICS, INC.
Proxy for Annual Meeting of Shareholders - December 8, 1999
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned constitutes and appoints Charles B. Girsky and Joel H.
Girsky, and each of them, proxies of the undersigned (the "Proxies"), with the
power to appoint a substitute, to represent and to vote all shares of common
stock of Jaco Electronics, Inc. (the "Company"), $0.10 par value per share (the
"Common Stock"), which the undersigned would be entitled to vote if personally
present at the Annual Meeting of Shareholders of the Company, to be held on
December 8, 1999, and all adjournments thereof, as follows:
*1. To vote on the election of each of the following nominees to the Board
of Directors, as indicated:
FOR all nominees listed below (except as marked to the contrary). |_|
WITHHOLD AUTHORITY to vote for all nominees listed below. |_|
Stephen A. Cohen, Edward M. Frankel, Charles B. Girsky, Joel H. Girsky and
Joseph F. Hickey, Jr.
(INSTRUCTIONS: To withhold authority to vote for any individual nominee, strike
a line through the nominee's name above.)
2. To vote, in the discretion of the Proxies, on such other matters as
may properly come before the meeting.
*The shares of Common Stock represented by this Proxy shall be voted as directed
above by the shareholder. In the absence of such direction, the shares of Common
Stock shall be voted FOR the matter set forth in item 1.
Receipt of the Notice of Annual Meeting, the Proxy Statement, and the Annual
Report to Shareholders is hereby acknowledged.
Date: , 1999
Signatures of Shareholders
Please sign as name appears hereon. If signing as attorney, executor,
administrator, trustee, guardian, or other fiduciary, please give your full
title as it appears. If shares of Common Stock are held jointly, each named
shareholder should sign.
PLEASE DATE, SIGN, AND RETURN THIS PROXY PROMPTLY.
